During their first meeting in Berlin, German Chancellor Angela Merkel and French
Socialist President-elect François Hollande underscored the importance
of Germany and France continuing to work closely together in the interests of
Europe, and their responsibility and commitment to collaborating on ideas aimed
at stimulating growth in Europe ahead of the European Council meeting in June.
While reiterating his intention to renegotiate the fiscal compact signed in
March by twenty-five of the twenty-seven European Union member states, aimed
at strengthening fiscal discipline in Europe, Hollande nevertheless failed to
indicate whether this would involve changes to the actual content of the agreed
fiscal compact, or whether his plans would necessitate the drawing up of a separate
agreement for growth.
Hollande merely highlighted his plans to add “a growth dimension”
to the pact, noting that this would be achieved once all proposals aimed at
boosting growth had been discussed and the means with which to legally implement
the measures examined.
Ideas relating to improving competitiveness, investing in the future, eurobonds,
and the use of European structural funds should first be debated at the informal
Council meeting on May 23, before being examined at the European Council meeting
at the end of June, Hollande explained.
At national level, in view of first quarter growth in France of "practically
zero”, Hollande announced plans to commission a report evaluating the
country’s 2012 budget, to ensure that it will meet the outgoing French
government’s deficit reduction targets.
Alluding to fresh elections in Athens planned for June, both the German Chancellor
Angela Merkel and French President Hollande underlined their determination to
ensure that Greece remains in the eurozone, emphasizing that every effort would
be made to support and to secure growth for Greece.
Following the latest Eurogroup meeting in Brussels, Luxembourg’s Prime Minister
and Eurogroup President Jean-Claude Juncker confirmed that the Eurogroup’s
consolidation strategy, in accordance with provisions contained in the Stability
and Growth Pact, ‘remains appropriate’ and will therefore continue
to form the cornerstone of its strategy to correct fiscal and economic imbalances
to overcome the crisis and to return to sustainable growth.
Adamant that there is no contradiction between fiscal consolidation and growth-orientated
policies, the Eurogroup President emphasized that on the contrary, both policies
are “mutually reinforcing” and should therefore be pursued in parallel.
During the course of the Eurogroup meeting, Eurogroup ministers analyzed the
financial and budgetary situation of several member states.
The Eurogroup welcomed the measures announced by the Spanish government recently
to continue reforms in the banking sector, to support investor confidence and
to mitigate the vulnerability of the country’s banks. The ministers nevertheless
urged Spain to speed up its external analysis of the banking sector, and to
take any measures necessary to implement credible security mechanisms.
Here, Juncker underlined that given “the current circumstances”,
speed is of the essence.
The Eurogroup commended both Ireland and Portugal on the solid implementation
of their support programmes. According to the Eurogroup ministers, Portugal’s
ambitious fiscal consolidation efforts and structural reforms have already borne
the first fruits in terms of rebalancing the economy towards a sustained growth
in exports.
Alluding to the crisis situation in Greece, Juncker explained that the Eurogroup
had taken note of the results of the legislative elections held on May 6, and now
expects the swift formation of a new government in Greece, which will both respect
and have a sufficient parliamentary majority to implement the agreed programme.
Since May 2010, eurozone member states and the International Monetary Fund
have made a significant contribution to Greece to support the country in overcoming
its economic problems. Financial assistance currently stands at EUR148bn (USD188bn),
although the board of directors of the European Financial Stability Facility
(EFSF) have recently agreed to disburse the remaining EUR5.2bn of the first loan tranche (EUR39.4bn),
of which EUR1bn will be paid out before the end of June.
Concluding his remarks, Juncker warned that although the Eurogroup acknowledged
the extent of significant efforts made by the Greek people, now is not the time
to relax these efforts. On the contrary, fiscal and structural reforms are the
best guarantee for a more prosperous future for Greece within the eurozone,
the minister added.
It is the Eurogroup’s intention to keep Greece in the eurozone, and
the group will make every effort to achieve this, Juncker concluded.
HMRC has missed a great opportunity to bring clarity, transparency and fairness
in dealing with the intermediaries legislation commonly referred to as IR35,
according to members of the freelance community who were invited on to the Treasury
forum to discus the issue.
A number of bodies representing small businesses, the recruitment sector, freelance
services sector and freelancers claim the new IR35 Guidance published last week
fails to take into account key elements of their advice.
New HMRC guidelines on disguised employment, delayed from the initial planned
commencement date of April 6, were finally published on May 9.
The guidance is set to be accompanied by a new test which will categorize contractors
into 'High risk', 'Medium risk' and 'Low risk' in terms of their exposure to
the IR35 rules.
Twelve online questions will be used to determine this status, looking at issues
such as whether the freelancer has their own business premises, whether they
are obliged to protect themselves with professional indemnity insurance, whether
they are able to increase their business income by working more efficiently,
whether they employ people to assist them, whether they would be liable to correct
any mistakes made on a project at their own expense, and whether they have a
separate bank account for business cashflow and expenses.
Other key indicators, including the ability of the contractor to send a substitute
to work in their place, and advertising and other expenses incurred by the freelancer
will be taken into account under the new scoring system.
The new tools are being trialled, and will not immediately replace the IR35
scenarios currently given by HMRC as guidelines for freelancers to determine
if they are effectively disguised employees of their client.
Last year, a forum was set up to explore new approaches to the way IR35
is administered and monitor progress, consisting of representatives from HMRC,
industry organizations and independent tax experts. However, the business representatives on the forum
are united in their concern that the measures suggested in the HMRC report will
not go far enough and will not reflect the new approach promised by the government
at the 2011 Budget.
While accepting new advances such as better guidance, more detailed scenarios,
improved helpdesk, better trained teams and quicker decision making are positive
steps forward, there is a strongly held view by some of the external bodies
on the IR35 Forum that HMRC has missed an opportunity to introduce clarity and
fairness when introducing ‘business entity tests.’
The group feels that the questions, the scoring and the proposed use of the
business entity tests are counter-productive and represent greater complexity
rather than a simplification of IR35 that had been the government’s goal.
Ann Swain of the Association of Professional Staffing Companies said external
forum members had, “worked really hard to come up with a new approach
and had achieved positive progress in some areas” but, she added many
felt exasperated by HMRC’s reluctance to listen to their advice concerning
the new tests.
Chris Bryce, Chairman of the Professional Contractors Group (PCG) and IR35 Forum
member backed this view saying: “HMRC’s new guidance demonstrates
their fundamental lack of courage and commitment to improve the operation of
IR35. While the external members of the Forum have worked tirelessly to develop
innovative solutions, HMRC appear at this stage to have opted for a risk averse
approach that will not deliver the improvements that are so clearly needed.
”
The main unrest from the Forum revolves around the proposed ‘business
entity tests’, or more specifically, the scoring of the tests. Commenting
on this issue Martin Hesketh, the Freelancer & Contractor Services Association’s
representative on the Forum, said: “The proposed scoring system undermines
the business entity tests altogether. It will push a disproportionate number
of businesses into the high-risk category, and in so doing will prevent genuinely
high-risk cases from being identified. An alternative scoring system, backed
by a majority on the Forum, was suggested but to date those suggestions have
been rejected by HMRC.”
The IR35 Forum will now monitor the impact of the new measures over the next
12 months in what HMRC have termed, ‘the test and learn phase’.
However, over this period the business associations say that they will continue
to challenge HMRC to adopt a more radical approach to the issue.
The IR35 legislation was introduced in April, 2000, and was designed to combat
the avoidance of tax and national insurance contributions through the
use of intermediaries in circumstances where an individual would otherwise,
for tax purposes, be regarded as an employee of the client.
However, it was revealed last year that the tax yield generated through IR35
reviews in 2010 was just GBP200,000 (USD320,000). John Brazier, Managing Director
of the PCG said at the time that: “These figures confirm what PCG has
always said, that the tax yield from IR35 is minimal and that the stress and
damage done to the UK’s 1.4 million genuine freelance businesses is completely
unnecessary."